For years, India’s industrial ambitions were framed in slogans: “Make in India,” “self-reliance,” “manufacturing superpower.” The production-linked incentive programme — PLI in Delhi shorthand — is different. It is less a slogan than a machine: a time-bound, rules-based system of paying firms for incremental production carried out inside India. It is also one of the boldest experiments in industrial policy anywhere in the Global South. The hope is that it will turn India from a vast consumer market into a genuine manufacturing node in global supply chains. The risk is that it ends up paying handsomely for temporary assembly without building the depth that real competitiveness demands.

The Mechanics: Paying for Output, Not Announcements

PLI marks a clear departure from the old style of subsidies. Instead of handing out generic tax breaks or cheap land, the state commits to pay firms a percentage of their additional sales over a defined baseline — provided those sales come from production inside India and meet agreed criteria. It is, in theory, a pay-for-performance model. Companies have to invest, ramp up production and prove it before claiming anything.

The scheme spans more than a dozen sectors, from electronics and mobile phones to pharmaceuticals, advanced chemistry cells and automotive components. Its design is deliberately asymmetric: resources are concentrated where policymakers believe scale can be reached quickly and where strategic leverage is highest, especially in electronics, batteries and key inputs for green and digital transitions.

Where the Scheme Is Clearly Moving the Needle

Nowhere is PLI’s impact more visible than in smartphones and electronics. A decade ago, India imported the vast majority of the devices it consumed. Today, local plants assemble almost all phones sold in the domestic market and a rising share is exported. Global contract manufacturers that once concentrated almost entirely on East Asia have set up or expanded factories in Indian states such as Tamil Nadu, Karnataka and Uttar Pradesh.

Around these anchor plants, an ecosystem of logistics providers, testing facilities and some component makers is slowly forming. Export figures for electronics, while still modest in global terms, have moved from statistical footnote to meaningful line item. Policy-makers hold up these trends as proof that PLI can do what earlier schemes failed to achieve: turn announced investments into physical output at scale.

The Stubborn Macro Picture

Yet step back to the level of the whole economy and the transformation looks less dramatic. Manufacturing’s share in India’s GDP still hovers in the low teens, not far from where it stood a decade ago and well short of long-stated ambitions to reach something closer to one-quarter of output. Employment data suggest that while modern industrial clusters are expanding, a large share of India’s workforce remains trapped in low-productivity informal work, services and agriculture.

Part of the explanation is PLI’s deliberate narrowness. By design, it focuses on a limited set of capital- and technology-intensive sectors. That makes monitoring easier and may curb some forms of rent-seeking. It also means that labour-intensive sectors such as garments, footwear and basic engineering — historically the stepping-stones for mass industrial employment in East Asia — receive far less focused attention. PLI’s successes, where they exist, are therefore concentrated rather than broad-based.

Assembly Hub or Capability Builder?

Critics warn that PLI risks creating an “assembly economy”: imported components arriving in containers, being put together on Indian lines, and then shipped out again, with the subsidy effectively covering the cost of labour and some local services. In this view, the programme may deliver export statistics and photo opportunities without significantly upgrading domestic capabilities.

Supporters counter that value addition is not static. Firms that initially import most components can, over time, localise production as the supplier base thickens and as scale justifies investment in upstream activities. From this perspective, PLI is a bridge to a more complex industrial structure. The real test will be whether domestic suppliers begin to emerge as Tier-2 and Tier-3 vendors, not just in India but into plants outside the country.

Real Indicators That Show Whether PLI Is Working

The debate over PLI’s effectiveness will be settled less by slogans and more by a handful of measurable indicators. A useful way to think about them is not in exact figures but in trajectories: are they moving decisively in the right direction, stalling, or sliding back?

Infrastructure, Institutions and the Friction Tax

Even generous incentive schemes cannot cancel out basic frictions. For many firms, India’s attraction is still tempered by concerns about power reliability, port congestion, regulatory unpredictability and the time it takes to move goods across states. Some states have made visible progress: dedicated freight corridors are coming online; port handling has improved; clusters with more reliable utilities are emerging. Others lag behind.

In practice, PLI often functions as a way of compensating for these frictions. Subsidies soften the effective cost of operating in an environment where logistics, compliance and contract enforcement can be more demanding than in competing locations. That may make sense in the short term, but over the longer run, competitiveness will depend less on cheques from the exchequer and more on whether those frictions are reduced at the source.

Labour and Skills: The Human Constraint

Demography is frequently cited as India’s advantage: a young workforce and millions entering the labour market each year. But turning that into productive industrial labour requires targeted skills, not just numbers. Assembly work can be learned quickly, yet higher-productivity roles — in maintenance, process engineering, quality control or design — require sustained investment in training and vocational systems.

Early evidence suggests that PLI has created pockets of relatively well-paid industrial employment. Whether this can be scaled and diffused is less clear. If firms struggle to find mid-level technical talent, or if training systems cannot keep pace, there is a risk that operations are kept at the lowest rung of the value chain for longer than intended.

The Political Logic Behind the Programme

PLI also serves a political logic. It produces visible investments in key states, ribbon-cuttings that can be showcased in campaigns, and a narrative of national resilience: essential products, from phones to batteries, increasingly made at home. In a world of supply-chain shocks and geopolitical contestation, that narrative resonates with voters and policy elites alike.

The danger is that this political logic drives constant expansion of the programme, adding new sectors or extending timelines without rigorous evaluation of what has worked. A tool designed as a sharp, time-bound intervention can drift toward becoming a permanent fixture of the policy landscape, with all the fiscal and governance risks that implies.

What Would Genuine Success Look Like?

Genuine success would be visible in several ways. Manufacturing’s share of GDP would rise in a sustained fashion, not just bounce in response to global cycles. The export basket would diversify further into complex products, and India’s role in global value chains would deepen beyond final-stage assembly. Domestic firms would move from being subcontractors to owning more technology, brands and intellectual property.

It would also show up in resilience: when the incentive cheques taper off, investment and production decisions would still favour India because of its infrastructure, skills and regulatory reliability. Foreign investors would see it less as a subsidised bet and more as a natural part of their global footprint. And crucially, the gains would spill over beyond the enclaves of high-tech manufacturing into a broader base of suppliers and workers.

A Signal to the Rest of the Global South

For other emerging economies watching from Africa, Southeast Asia or Latin America, India’s PLI experiment poses a question they also face: can targeted, conditional incentives overcome late entry and structural disadvantages in global manufacturing? Or do they risk sparking a subsidy race that benefits mobile capital more than domestic capabilities?

India has advantages many peers do not: scale, a large internal market, and a technology and services ecosystem that can complement manufacturing. If it uses the PLI window to tackle underlying bottlenecks — logistics, contract enforcement, predictable taxation — the programme may be remembered as a catalyst that helped tip the balance. If not, it will join a long list of industrial policies that produced impressive announcements but only incremental change.